Part 1: The Impacts of the Alternative Scenarios of Secession

Publication date:
07/2015
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Part 1 focuses on the quantification of the economic implications for Catalonia in the event of becoming an independent state. This is a challenging task since such a decision would trigger a long chain of events, marked by a transition period and hence high uncertainty. Therefore, caution has been taken in formulating certain plausible scenarios that allow the capturing of some of the most important mechanisms in the adjustment process of Catalonia towards an independent state. Towards this end three scenarios have been quantified: a) a business as usual reference scenario in which Catalonia remains an integrated autonomous community of Spain and the fiscal imbalances with the Spanish Administration remain as they are, b) a mutual agreement scenario, in which negotiations are successful and Catalonia secedes from Spain, while agreeing to undertake 20% of Spanish debt and c) a unilateral secession scenario in which negotiations fail and Catalonia secedes from Spain, undertaking to service 12% of Spanish debt. Different interest rates and transition periods are assumed to prevail in each secession scenario, reflecting the different degree of underlying uncertainty. The case where negotiations would lead to extra fiscal autonomy within Spain has not been examined.